Consumer Price Index Shows South Korean Economy Now in Deflation

Statistics Korea announced on Dec. 2 that South Korea’s consumer price index increased by less than 1 percent for the 11th consecutive month in November this year with its core inflation rate hitting a 20-year low. Experts point out that the South Korean economy is now in deflation.

Last month, the consumer price index edged up 0.2 percent year on year and fell 0.6 percent from the previous month. In October, the producer price index as a leading indicator of consumer prices reached 103.61, down 0.6 percent from a year earlier, to further hinder a rise in prices.

Specifically, the consumer price index was 104.87 last month, when it showed a year-on-year increase of less than 1 percent for 11 months in a row. Such a low level for such a long period was the first time since records began in 1965. With 2020 around the corner, this year’s consumer price index is likely to be the lowest in history. From January to November, the index edged up 0.7 percent.

The core inflation index is a point of particular concern. The index, which does not reflect agricultural products and petroleum in order to grasp long-term price movements with seasonal factors and temporary impacts excluded, rose 0.6 percent year on year last month and 0.5 percent from a year earlier in September this year to show the lowest increases since December 1999. Likewise, the food- and energy-excluded core inflation rate that is used as OECD data stood at 0.5 percent, the lowest since December 1999.

An increasing number of economists are urging the government to come up with anti-deflationary measures. “The consumer price data shows that deflation has begun and a policy response to the deflation cannot be delayed,” said Yonsei University economics professor Sung Tae-yoon.